If you make a contribution to your spouse’s eligible super account by the end of the financial year you could receive a tax offset of up to $540.
Who can make and receive spouse contributions?
To be eligible for the full offset amount, your partner must have income less than $37,0001 in the 2018/19 financial year, and you must contribute at least $3,000. A lower tax offset may be available if you contribute less than $3,000 or your spouse earns between $37,0001 and $40,0001 pa.
You both need to be Australian residents at the time you make the contribution. Your spouse must either be under the age of 65 or, if aged between 65 and 69, they need to meet the work test requirements by having proof of working in gainful employment for 40 hours within a 30-day period during the year.
The non-concessional contributions (NCC) cap
Spouse contributions will count towards your spouse’s NCC cap, and penalties may apply if they exceed it. The annual NCC cap is $100,000 in 2018/19. The rules that relate to the NCC cap are complex. You can find out more about them at the ATO website.
The offset also won’t apply if your spouse exceeds their non-concessional (after tax) contributions cap for the relevant year. Or your spouse has a total super balance above the general transfer balance cap, which is $1.6 million for the 2018/19 financial year.
Another option for boosting your spouse’s super balance is to split eligible concessional (before-tax) contributions from your account to your spouse. These generally include the Superannuation Guarantee, salary sacrifice contributions and personal contributions for which you claim a tax deduction.
How does contribution splitting work?
If your super fund allows, you can split up to 85 per cent of the before-tax super contributions received in the previous financial year. The limit is set at 85 per cent because super funds deduct the 15 per cent contributions tax before the contribution reaches your partner’s super account.
Amounts you split to your spouse will not be treated as contributions in your spouse’s name. They will continue to count towards your concessional contributions cap, in the year you originally received them.
If you’re a member of a public sector fund different conditions may apply. It’s important to check with your fund to see whether or not you’re eligible to split contributions.
What are the benefits?
The benefits depend on your age and circumstances. They could include:
- better managing the tax payable if you and your spouse want to draw a superannuation pension before you’re 60 by providing access to two tax-free thresholds;
- the opportunity to take advantage of two super lump sum low-rate thresholds;
- reducing the assets assessed for the Centrelink means test if your spouse is younger than you. This could increase your Centrelink entitlement in certain circumstances.
Who can split contributions?
To be eligible for contributions splitting, your partner must be less than their preservation age, or between their preservation age and 65 and not retired.
Preservation age is based on your date of birth.